John Lore, founder of Capital Fund Law Group has stated that institutions and universities are planning to invest in the cryptocurrency market, recognizing the long-term potential of cryptocurrencies such as bitcoin and ethereum.
“We’re seeing some academic institutions getting involved on a limited basis for strategic reasons. I can’t say the names of [the academic institutions] because that’s attorney-client but we have people mostly on the East Coast that have begun doing investments in this space on a fairly modest basis,” Lore noted in an interview.
An institutional investor according to the definition is an entity that raises fund from various sources to buy properties, securities, and assets. Institutional investors include entities such as banks, insurance companies, hedge funds, endowments, and mutual funds.
Small hedge funds and medium-sized investment firms are not categorized as institutional investors which are different from the opinion of several investors in the cryptocurrency market. However, entities such as universities and endowments are proper institutional investors that can offer many billions of dollars to the cryptocurrency market and increase the liquidity of cryptocurrencies.
Yet, for academic institutions and endowments to invest huge sums of funds into the cryptocurrency market, the right custodian solutions are required as cryptocurrency hedge funds Blocktower funder, Ari Paul earlier noted:
“Institutional money started trickling into cryptocurrency in mid-2017, but it’s been slower than many (including myself) expected. That doesn’t mean it’s not coming. There are a lot of pieces that need to come together, one big piece being third party custody. Custody isn’t binary. It’s not like Coinbase custody will launch and suddenly every pension will throw $100m into BTC. It takes time for custody solutions to gain trustworthiness. But, I think we’ll have solid third-party custody by September of this year.”
Lore shared a similar view to Paul stating that the greater number of investment that has entered the cryptocurrency market is from high net-worth people and family offices rather than institutional investors. However, Lore stressed that there are different institutional investors that play an active role in the cryptocurrency market, and once possible regulatory issues are diverted, institutions will start to invest in the market.
But, Lore noted that university endowment funds have for a while been investing in the cryptocurrency market in a limited basis, going on to say the increasing interest toward the market by endowments indicates the strong potential of cryptocurrencies in the future.
“We see academia as a tie between these somewhat young and enthusiastic fund managers and capital raising,” Lore added.